THE International Monetary Fund (IMF), in its recent review, urged Zimbabwe to provide greater clarity on its plan to end the use of the US dollar by 2030. The Fund warned that lingering uncertainties threaten to undermine confidence in the economy, pointing to weak acceptance of the ZiG currency introduced in 2024, fragile fiscal stability, and a shallow monetary policy framework.
By Brighton Musonza
While these observations reflect legitimate concerns about Zimbabwe’s economic trajectory, the IMF’s prescription betrays a deeper flaw: it assumes that de-dollarisation is a technical exercise that can be neatly mapped against conventional economic frameworks. Yet, the reality is far more complex. De-dollarisation is not a textbook process with a universal blueprint—it is contextual, historical, and institutionally embedded. The IMF itself has no definitive methodology for managing such transitions. For Zimbabwe, the challenge is not merely one of clarity, but of reclaiming monetary sovereignty as the precondition for sustainable development.
I. The IMF’s Standard Playbook vs. Zimbabwe’s Context
The IMF’s concerns centre on three areas:
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Whether the ZiG will evolve into a full mono-currency, or whether the dual use of the US dollar will persist.
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How will fiscal pressures and public debt, currently at $21 billion, will affect currency stability.
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Whether Zimbabwe can maintain policy credibility without jeopardising fragile confidence.
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The Dispute Over Foreign Exchange (FX) Management
The sharpest disagreement lies in the FX market and surrender requirements. IMF staff argue that reducing the RBZ’s footprint, phasing out surrender obligations, and redirecting flows to authorised dealers would build confidence, narrow the gap between official and parallel rates, and make the WBWS a credible nominal anchor.
By contrast, the Zimbabwe Reserve Bank (RBZ), in its strong response, maintains that the Willing-Buyer/ Willing-Seller (WBWS) rate is “fully market-determined” and rejects the claim that it is a dominant player. It argues that diverting surrender requirements to the market would weaken its ability to stabilise the currency and to build vital reserves. Instead, it is open to gradually redirecting any incremental surrender obligations to the market, but only once a transparent interbank FX system is in place.
The RBZ has formally requested IMF technical assistance to develop such a platform. Until then, it insists that its managed approach remains the only viable path to stability.
These questions reflect the IMF’s orthodox framework, which privileges currency stability, inflation control, and debt sustainability as the pillars of economic management. But this narrow lens obscures a more fundamental truth: dollarisation itself is the root of Zimbabwe’s developmental paralysis.
Unlike countries with sovereign currencies, Zimbabwe cannot deploy the full spectrum of monetary policy tools—interest rate setting, liquidity provision, quantitative easing, or central bank-backed guarantees. The IMF’s critique ignores this structural incapacity and instead demands clarity on a process that is inherently non-linear and dependent on domestic political economy.
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Monetary Tools and the ZiG
IMF staff criticised the use of required reserves and NNCDs for liquidity management, recommending instead indirect, tradable securities with market-based interest rates. The RBZ responded that it plans to evolve gradually towards such tools, beginning with the introduction of multiple NNCD tenors, remuneration of deposits, and eventually a Term Deposit Facility.
Furthermore, the authorities indicated that the forthcoming National Development Strategy 2 (NDS2) would clarify the treatment of USD and ZiG deposits, and outline surrender requirement policy in the context of the 2030 dedollarisation roadmap.
II. The Illusion of Stability under Dollarisation
Dollarisation, adopted in 2009 as a defensive response to hyperinflation, provided temporary relief by restoring transactional confidence. But what is celebrated as “stability” is in fact economic stagnation masquerading as order.
Dollarisation strips Zimbabwe of its developmental agency. Without control over its currency, the state cannot finance large-scale capital formation. Public investment in infrastructure, energy, agriculture, and manufacturing is constrained by fiscal revenue, with no recourse to monetary expansion or sovereign borrowing instruments.
This has created a paradoxical form of stability: inflation is subdued, but the economy lacks the endogenous momentum to grow. In effect, Zimbabwe is trapped in “macro-stability without agency.”
III. The Role of Investment Banking and Monetary Sovereignty
Modern development requires deep investment ecosystems. High-capital projects—railways, energy grids, industrial parks—are financed not through household savings, but through investment banking institutions working in tandem with central banks and Treasuries. These ecosystems require sovereign currencies to function effectively, since central banks provide liquidity, guarantees, and legal tender instruments that underpin risk-sharing.
In Zimbabwe’s dollarised regime, this architecture is impossible. The Reserve Bank of Zimbabwe (RBZ) cannot issue US dollars, cannot guarantee dollar-denominated bonds, and cannot serve as a lender of last resort. Investment banks therefore lack the tools to mobilise domestic capital for long-term projects.
This sterilises the financial sector, reducing it to a transactional role rather than an engine of industrialisation. In sovereign economies, banking intermediation channels pension funds, sovereign wealth funds, and long-term credit into development. In Zimbabwe, such mobilisation collapses under the weight of a foreign currency regime.
IV. Comparative Lessons: Latin America and Panama
The IMF often points to dollarisation experiments as stabilising mechanisms, but historical evidence is sobering. Latin American economies that embraced dollarisation under IMF-guided frameworks—such as Ecuador and El Salvador—suffered severe de-industrialisation, fiscal rigidity, and dependency traps. These economies avoided hyperinflation but failed to industrialise, remaining commodity-dependent and fiscally constrained.
Panama is often cited as the “success story” of dollarisation, but its economy is sui generis. Its prosperity rests on the Panama Canal, a strategic global trade artery that generates rents independent of domestic monetary sovereignty. Zimbabwe, lacking such a rentier asset, cannot replicate this model.
V. Historical Context: The Rhodesian Example
History provides Zimbabwe with its own lessons. During the Rhodesian era, under sanctions, domestic capital was channelled into agriculture, manufacturing, and infrastructure through merchant banks such as RAL. This system worked precisely because Rhodesia maintained monetary sovereignty, allowing the central bank and Treasury to coordinate resource mobilisation.
By contrast, contemporary Zimbabwe—despite operating in a less hostile global environment—cannot finance even modest industrial projects. The difference lies not in ambition or capacity, but in the disabling effect of a foreign monetary regime.
VI. The Core Systemic Risk: Monetary Impotence
For long-term investors, the greatest systemic risk in Zimbabwe is not politics or regulation, but monetary impotence. Dollarisation prevents the state from acting as a counter-cyclical investor. It outsources monetary policy to the US Federal Reserve, whose priorities have no bearing on Zimbabwe’s developmental trajectory.
Without sovereign instruments, Zimbabwe cannot guarantee liquidity in times of crisis, cannot underwrite industrial policy, and cannot create the financial depth required for investor confidence. This perpetuates a cycle of dependency: shallow domestic capital markets, reliance on short-term foreign capital, and vulnerability to external shocks.
VII. The Developmental Trap
Dollarisation entrenches a vicious cycle:
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Without investment, growth stagnates.
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Without growth, fiscal surpluses shrink.
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Without fiscal surpluses, infrastructure collapses.
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Without infrastructure, private capital retreats.
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Without monetary sovereignty, the state cannot break the cycle.
No country in the global South has industrialised under dollarisation. The Asian Tigers—South Korea, Malaysia, China—built their development on sovereign currencies, central bank activism, and strategic financial mobilisation. Zimbabwe cannot expect a different outcome under a foreign currency regime.
VIII. Reclaiming Sovereignty: The Way Forward
Zimbabwe’s future depends on reclaiming the tools of statecraft. This requires:
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Restoring full monetary sovereignty through a credible national currency supported by institutional reforms at the RBZ.
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Rebuilding investment banking ecosystems, integrating pension funds, sovereign funds, and capital markets into a national developmental finance framework.
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Sequencing de-dollarisation pragmatically, balancing short-term transactional stability with long-term institutional deepening.
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Resisting IMF orthodoxy, which privileges debt servicing and fiscal austerity over developmental investment.
The choice before Zimbabwe is not between inflation and stability, but between sovereignty and stagnation. Clarity on de-dollarisation will not be found in IMF manuals—it must be forged through Zimbabwe’s own political economy, institutional reforms, and developmental priorities.
Conclusion
The IMF’s call for clarity is understandable but misplaced. De-dollarisation is not a technical exercise; it is a sovereign project. For Zimbabwe, the real task is not to appease creditors or mimic foreign templates, but to rebuild the capacity to finance its own development.
Dollarisation may temporarily stabilise prices, but it leaves Zimbabwe incapable of imagining or financing transformative projects. To break the developmental trap, Zimbabwe must reclaim its monetary sovereignty, modernise its central banking system, and establish a robust investment banking ecosystem.
Until this happens, the economy will remain stable but stagnant—an illusion of order masking the deeper reality of arrested development. Zimbabwe must choose sovereignty, not stagnation.
